Australian Average 2009 tax rates

Tax rates 2008-09

Ok so – I earn $60,000 x 30% tax rate = I pay $18,000 tax – right?? (No! this is wrong!). Individual tax rates are a MARGINAL system – on the first $6,000 you pay nothing, then 15% for the next amount, etc.

Below is the (CRAP!) ATO tax table telling how to work out how much you are taxed.

Taxable income

Tax on this income

$1 – $6,000

Nil

$6,001 – $34,000

15c for each $1 over $6,000

$34,001 – $80,000

$4,200 plus 30c for each $1 over $34,000

$80,001 – $180,000

$18,000 plus 40c for each $1 over $80,000

$180,001 and over

$58,000 plus 45c for each $1 over $180,000

So if you earn $60,000 you will pay $12,000 tax. Now if you divide tax by taxable income $60,000 you get 20%. So the average rate of tax you actually pay is 20%. (although obviously any dollar$ you earn over $60,000 you will pay 30c tax until $80,000 then 40c, etc.). The (WAY BETTER!) table below shows how this works:

1

2

1 divided by 2

% tax on extra $

Taxable Income

Tax

Average Rate

Marginal rate

6,000

0

0.0%

0.0%

10,000

600

6.0%

15.0%

15,000

1,350

9.0%

15.0%

25,000

2,850

11.4%

15.0%

34,000

4,200

12.4%

30.0%

40,000

6,000

15.0%

30.0%

50,000

9,000

18.0%

30.0%

60,000

12,000

20.0%

30.0%

80,000

18,000

22.5%

40.0%

150,000

46,000

30.7%

40.0%

180,000

58,000

32.2%

45.0%

250,000

94,500

37.8%

45.0%

500,000

207,000

41.4%

45.0%

Now if you earned $50,000 this year you can tell your friends that you paid 18% tax (and have them telling you that you are wrong!).

Your ‘way better table’ is rubbish. if you want a good table it should also take into account the Medicare levy and the low income tax offset at the very least.
Of course it’s the government’s fault for not abolishing both things and adjusting the marginal rates accordingly. How about a tax free threshold of 17K and tax rates of 16.5%, 31.5%, 42.5% and 47.5%. That would more accurately reflect what we’re paying now and cut out layers of complexity at the same time.